With the advent of ubiquitous electronic commerce over the Internet, much attention has been paid to the problem of "fair exchange" of information goods over remote communication channels. During an exchange over the Internet, information goods-such as electronic cash, digital signatures on promissory documents, computer application programs, data, and the like-are typically transmitted between two remote parties who have essentially no knowledge of each other. The problem of "fair exchange" involves ensuring that the parties truly exchange the information goods for which they have previously bargained. The problem involves issues such as who sends their goods first, and how can a party be assured that once they send their goods, the other party will abide by the agreement and send its goods back in return.
In conventional, face-to-face business transactions involving concrete goods, the fair exchange problem is solved by social mechanisms. For example, a customer who is purchasing an item from a merchant initiates a purchase by laying money (e.g., cash, check, credit card, etc.) down on the store counter. The merchant hands over the item and collects the cash to complete the transaction. If, for some reason, the merchant decides to depart from this social exchange protocol and take the money without giving the item in return, the customer has several avenues of recourse, including acting disruptively in the store, informing other patrons that the merchant is acting unscrupulously, or summoning a police official. Similarly, if the customer acts illegally and attempts to take the item without payment, the merchant can summon in-store security personnel or a police official for prompt remedy.
In a remote environment such as the Internet, there is no physical transaction between face-to-face parties. It may be impossible to identify either party, or to establish that a party actually received what the other party claimed to have sent. There are no Internet police to summon. Indeed, most of the social conventions that are used in point-of-purchase exchanges are utterly worthless in Internet commerce.
For commerce to succeed over the Internet, the fair exchange problem needs to be solved. One traditional solution is to involve a third party as a facilitator to the transaction. Both parties send their information goods through the third party, who mediates the exchange. For example, most commerce over the Internet today is in the form of credit card transactions, in which customer banks and merchant banks are brought together by the credit card company under a complex agreement that determines who will bear the cost if one of the parties to the transaction reneges. In effect, the banks, under the credit card's aegis, mediate the entire transaction, using their previous traditional relationships with customers and merchants to assign liability in the event of disputes.
The drawback with employing a third party facilitator is that such mediation is expensive. Moreover, a third party sufficiently trusted by both parties to mediate the entire transaction (including possibly the exchange of secret information) might not be available. It is therefore desirable to avoid use of exchange intermediaries.
Another prior art solution to the fair exchange problem is to use a gradual exchange protocol. The parties divide their respective information goods into sub-units and slowly exchange individual sub-units. Each party gradually receives the other party's sub-units and reconstructs the information goods, piece-by-piece. If one party reneges, the other party stops sending the remaining sub-units and hopefully, the reneging party is unable to glean any value from the sub-units that have already been sent.
The gradual exchange protocol has a drawback in that it is computationally expensive to divide the goods, transmit them in piecemeal fashion, receive the sub-units from the other party, and reconstruct the other party's goods from the received sub-units. Another drawback with this approach is that one of the goods might become valuable more quickly. That is, upon the exchange of the n.sup.th sub-unit, one party may have something of value while the other party does not. This can present a problem.
Accordingly, there remains a need for a fair exchange protocol that safeguards the parties' interests without introducing costly third parties or expensive exchange techniques.